The immediate impact of the UK leaving the EU might be limited, but keep your eye on the ball

31.01.20

By Charles Livingstone, Partner, Government, Regulation and Competition, Brodies LLP

The UK will formally leave the EU at 11pm this evening. The immediate impact of this formal exit will be limited, but it is important to understand that this is not the end of the process.

Most of the effects of Brexit will be postponed until the end of 2020 when the transition period is due to end. During transition the EU and the UK behave, for effectively all purposes, 'as though' Britain was still in the EU. In particular, the UK will continue to follow EU laws. However, from the beginning of 2021 (assuming the Prime Minister sticks to his commitment not to extend the transition period) we will start to see significant changes.

A lot of work has already been done to prepare the Scottish legal system – and the other legal systems in the UK – for Brexit. The European Union (Withdrawal) Act 2018 provides for a 'snapshot' of European law to be taken at the end of the transition period. That snapshot will become part of British law (snappily titled "retained EU law"), though with some modifications to ensure the law still works outside the EU. The aim is to avoid disruption to the legal system. That snapshot of the law can then be changed over time by the UK Parliament, Scottish Parliament and other devolved institutions, subject to any restrictions agreed as part of a UK-EU trade deal. EU law will also develop in future, but without affecting the "retained EU law" snapshot. Scots law will, therefore, diverge from EU law over the longer term. It is difficult to say now which areas are liable to be the focus for change, but agriculture and environmental protection (which are currently heavily regulated by the EU) are obvious examples.

The 2018 Act made clear that post-Brexit the UK Supreme Court and Scotland's High Court of Justiciary would no longer be bound by European Court of Justice decisions when interpreting "retained EU law". That freedom may be widened under the European Union (Withdrawal Agreement) Act 2020, which empowers the UK Government to extend the same flexibility to lower courts and tribunals including Scotland's sheriff courts and Court of Session.

If, however, the UK and the EU cannot agree and implement the details of their future relationship in time for the end of the transition period, this will lead to another 'no-deal' scenario at the end of the year. While those areas dealt with in the Withdrawal Agreement (citizens' rights, post-Brexit trade with Northern Ireland and money) have been resolved, in other areas the 'no-deal' risks businesses were preparing for first in March 2019 and then in October 2019 and January 2020 (e.g. tariffs on UK-EU trade) will reappear towards the end of the year. Businesses should, therefore, keep a close eye on negotiations and their 'no deal' plans close to hand.

This article first appeared in The Herald on 31 January 2020

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